MarketView for July 9

Summary

The major equity indexes chalked up their fourth consecutive day of gains on Tuesday as the Street anted up, believing that companies will be able to surpass the low bar set for earnings season, leaving room for better-than-expected results that could drive the rally up even further. The push higher in recent days has taken the benchmark S&P 500 index to 1 percent below its all-time closing high of 1,669 reached on May 21.

The gains also suggest that investors are becoming more comfortable with the prospect of the Federal Reserve slowing the pace of its economic stimulus, which has been a major driver of the equity rally this year.

Nine of the 10 S&P 500 industry sector indexes ended higher. Material and industrial shares recorded the largest gains after Alcoa affirmed its global demand forecast for aluminum products when it reported results after Monday's closing bell. Alcoa's release is traditionally viewed as the unofficial start to earnings season.

For the most part, analysts are expecting second-quarter results to be soft with weak sales, but expectations are for a pickup later in the year. Even so, investors are starting to think earnings expectations may have been ratcheted down too low.

The Street is looking for the earnings of those companies making up the S&P 500 index to increase by about 2.9 percent in the second quarter from a year ago, well below the 6.1 percent that was forecast in April, according to Thomson Reuters data.

Forecasts for growth in the first quarter were similarly revised lower to as little as 1.5 percent. The earnings season ended up beating that with growth of 5.4 percent.

Alcoa reported adjusted profit and revenue above Wall Street forecasts after Monday's closing bell. Still, its stock dipped 0.1 percent to $7.91. In contrast, the S&P materials sector index .SPLRCM jumped 1.6 percent. The S&P industrials index .SPLRCI climbed 1.5 percent.

FedEx rose FedEx ended the day up 4.4 percent to close at $103.15, its highest close since mid-March, on speculation that billionaire William Ackman planned a large investment in the company.  .

The earnings calendar remains light until Friday when JPMorgan Chase and Wells Fargo are set to report results.

Volatility has fallen in recent weeks on waning fears about imminent reductions in the Federal Reserve's $85 billion a month of bond purchases. The Market Volatility Index is now down more than 30 percent since late June. On Tuesday, the VIX fell 2.9 percent to end the day at 14.35.

The Fed will release the minutes from its June policy meeting on Wednesday. Investors will watch for clues into the timing of possible trimming of stimulus measures. Last month, Fed Chairman Ben Bernanke said the economy is expanding strongly enough for the central bank to start slowing the pace of its bond-buying stimulus later this year.

In the health-care sector, Health Management Associates has attracted takeover interest from Community Health Systems and other rivals about buying the hospital operator. Shares of Health Management ended the day up 8.3 percent to close at $16.75.

Intuitive Surgical fell 16.2 percent to close at $419.30 after the maker of the Da Vinci surgical robot indicated on Monday that it expects second-quarter revenue below Street expectations.

Volume for the day saw approximately 5.8 billion shares change hands on the three major equity exchanges, a number that was well below the year-to-date average daily closing volume of 6.4 billion shares.